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    Relying on outdated dental practice valuations

    When to find out the value of your dental practice—and when to sell.

    It is difficult to convince a dental professional to retain an expert and then suggest that the dentist pay for the preparation of a practice valuation. Many practice transition brokers tell the dentist that they will produce a valuation for free. The experience is troublesome since many dentists think they know the value of their practice and shouldn’t have to pay someone to tell them what they already know. Unfortunately, things don’t quite work this way when attempting to transition a practice.

    A self-prepared valuation or one made by a broker looking for a commission on the sale frequently inflates the value of the practice. This is looked at by independent practice brokers and lenders with a jaundiced eye because these types of brokers have reputations for presenting valuations that purport a worth that is not realistic. Lenders also get to know people who prepare valuations that are well above a potential sale price since they are designed more for the sales and commission agreement than to give the seller an honest opinion of value. The importance of this appraisal prepared by a qualified representative is vital to selling the practice at a legitimate price. 

    Receiving a valuation, then procrastinating

    Selling the dental practice presents a professional transition as well as an emotional and personal lifestyle change. It creates a new world for the seller. From going to work every day and seeing the same staff, office, and similar schedules from years of working a specific routine, to now waking up and not having the responsibility creates a new outlook on the world.

    This is a passage of identity and may end up being deferred because he or she can’t quite get ready for this dramatic event. The sale sometimes is postponed until the valuation becomes outdated and a potential buyer (and the buyer’s lender) won’t rely on the old data and value, especially if the seller is approaching retirement and has slowed down with lower revenues and profits reported after the valuation date. With such a financial and emotional period, it is understandable that someone is not quite ready to forgo a lifestyle consistent with that of a successful dentist.

    Bruce Bryen, CPA, CVA
    Bruce Bryen is a certified public accountant with over 40 years of experience and is a part of RKG Tax & Business Services LLP, an ...

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